Buying from the poor Apr02

International Trade has long been recognised as an engine for development, but to play this role, developing countries need better market access for products of interest to them and support in expanding capacity. The agreement reached at the Fourth WTO Ministerial Conference in Doha, Qatar (November 2001) to launch a new round of trade negotiations creates the expectation that the international trading system will be significantly improved. The hope is that this will truly stimulate development worldwide, benefiting both industrialised and developing countries.

Open trade enhances growth and welfare by improving production efficiency through specialisation based on comparative advantage. It also stimulates investment efficiency, due to increased market size and greater access to capital goods. Productivity rises as a result of the diffusion of technological advances, faster knowledge growth and allocative efficiency from stronger competition. However, developing countries can only benefit fully if they have appropriate institutions, policies, infrastructure and services to encourage growth in export production capacity.

The comparative advantage of many developing countries lies in labour-intensive production such as agriculture and low technology manufactures. Textile quotas are to be abolished by 2005, but tariff barriers remain high. High tariffs for agricultural commodities and continued subsidy paid to farmers in the OECD countries, including the EU, have detrimental effects on agriculture exports and world commodity prices. Such barriers and subsidy severely affect developing countries' export earnings and growth possibilities. The application of phytosanitary requirements serves as an additional barrier. The small scale indigenous poor farmers, engaged in producing export crops using labour intensive methods, are seriously disadvantaged by these barriers and subsidy and fail to access Western markets.

I believe that the WTO negotiation must focus on the USD 325 billion annual subsidy and trade barriers so that a way can be found to eliminate them. Initially, elimination will mean a price rise for food and other agricultural commodities, adversely affecting vulnerable groups in the poor food-deficit countries. In this context, greater technical and financial support is essential to stimulate the production response from higher prices. At the same time, additional food aid may be needed during the transition period.

The EU initiative "Everything but Arms" is an attempt to provide tariff-free access to the products of LDCs. A similar response from other OECD countries would greatly assist developing countries. Sadly, removing tariffs without eliminating subsidy will continue to distort world prices resulting in food surpluses from highly mechanised farms in industrialised countries. Such surpluses are currently dumped in poor countries e.g. poultry, beef, maize, sugar, rice and milk powder. They result in the destruction of local farmers already struggling with poor soils, little rainfall, inadequate infrastructure and no government subsidy!

Over the last seven years, the International Fund for Agricultural Development (IFAD) has promoted the emergence of competitive private sector agriculture markets and assisted smallholder producers in building their capacity to engage in the new markets on fair terms. For example, IFAD programmes are helping foster rural market linkages in Mozambique, Tanzania, and Zambia. The programmes promote investment in smallholder market organisation and knowledge, storage and transport infrastructure as well as improvement of the policy and regulatory environment. The aim is to create conditions that can attract growing private-sector investment and efficient suppliers. The programmes promote collaboration between government, smallholder producers, private sector and civil society. A key objective of the programme is to ensure that the most vulnerable producers, especially women, can participate in the definition of priorities and benefit fully.

The early experience of these programmes is very promising. It suggests that it is indeed possible to find imaginative ways for poor producers to benefit from globalisation, rather than be further impoverished by it. Let us all help buy from the poor by selecting their products in our supermarkets - check the source and give priority to those from developing countries!